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Tax on foreign income

UK resident with UK dividend income and ISA

Hi,

I'm a UK resident and own a retail business. Annual salary/dividend of around £43k pa and I try to put in as much as I can in to my Stocks & Shares ISA. Next year I will be moving to Malaysia to form a completely new company. I asked my accountant about being taxed in the UK on any income/dividends earned in Malaysia and he advised that as long as I don't send it to my UK bank account then I won't be liable for UK tax.

However, I wasn't completely convinced and the more reading I do the more complicated it seems to get.

Any advice would be appreciated. In a perfect world I'd like to continue being taxed on my UK income/dividends and student loans and inputting in to my ISA while living in Malaysia permanently, earning dividends and paying Malaysian tax on my Malaysian earned income. I have no intention of sending Malaysian earned income back to the UK.

Thanks for any input.

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06th Nov 2017 08:48

It's not that complicated and I suspect you have simply misunderstood what your accountant has said. Have another read of that advice.

I'd have to check (or perhaps you should) but I recall a rule that people living permanently in Malaysia cannot contribute to ISAs. Forgive me if I've got my wires crossed.

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06th Nov 2017 09:27

Its a bit more involved than just paying foreign income into a UK bank account. you have to consider your UK tax residence status.

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06th Nov 2017 11:10

If you cease to be UK tax resident (which may or may not be a complicated matter, depending on your exact circumstances), you should not be taxable in the UK on income you earn in Malaysia, even if you remit it to the UK.

UK source income is potentially still taxable in the UK, but might also be taxable in Malaysia, albeit with some allowance for the UK tax - you need local advice there.

Don't forget that your UK ISA investments are only tax-free because of UK tax law. You won't be eligible to contribute to a UK ISA once you are non-resident, but any income and gains from the existing UK ISA should be declared in Malaysia - they are not tax-free under their laws. Take a look at the UK-Malaysia tax treaty: https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil....

If you are likely to have homes in both the UK and Malaysia, your tax residence position is likely to be complex, so take proper advice.

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06th Nov 2017 15:38

The UK has a tax treaty with Malaysia which determines how cross-border income will be taxed. UK company dividends paid to a resident of Malaysia for example, will be taxable income in Malaysia.

Your ISA is effectively frozen after the end of the tax year in which you cease to be a UK resident. You can't add any more to it until such point as you move back to the UK.

When you cease to become UK tax resident is going to be determined by HMRC's Statutory Residence Test. It's not as simple as ceasing to be resident on the day you leave the UK, it will also include other ties to the UK such as whether you continue to have a home here.

You might want to take advice from someone with more experience of dealing with international issues than your current accountant.

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By Jtl
06th Nov 2017 15:56

Thanks for all your advice, I really appreciate it. I will pass on your comments to my accountant. Originally I said to him that I would just be setting up a business in Malaysia and not moving there and he was quite confident I wouldn't be liable for UK tax on any Malaysian income. Thanks for confirming my suspicions. Maybe it's quite recent legislation where the UK taxes global income if I am UK resident (even if I don't bring it back to the UK) that he wasnt aware of.

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to Jtl
06th Nov 2017 18:41

Quote:

Maybe it's quite recent legislation where the UK taxes global income if I am UK resident (even if I don't bring it back to the UK) that he wasnt aware of.

No, it isn't recent - or even quite recent.

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06th Nov 2017 16:17

You might be forgiven, from reading the last two contributions, for thinking that tax is imposed under the tax treaty. Not so. The UK has tax laws; Malaysia has tax laws. Income could be taxed in both countries. The treaty is there to relieve a potentially excessive tax burden. It does not - it cannot - impose taxes.

None of us responding to your question knows what you will be doing. It's possible that much of what has been said is pretty irrelevent to you. (But it might not be - which is why it's been said. It depends on what you do - if by "permanently" you meant "full-time" then, probably, it shouldn't be too difficult.)

EDIT: we crossed in the typing. It sounds as if the question you asked didn't reflect what you were actually going to do. (Or I misunderstood, not for the first time.)

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